Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154438
Authors: 
Conti, Antonio M.
Neri, Stefano
Nobili, Andrea
Year of Publication: 
2017
Series/Report no.: 
ECB Working Paper 2005
Abstract: 
Inflation in the euro area has been falling since mid-2013, turned negative at the end of 2014 and remained below target thereafter. This paper employs a Bayesian VAR to quantify the contribution of a set of structural shocks, identified by means of sign restrictions, to inflation and economic activity. Shocks to oil supply do not tell the full story about the disinflation that started in 2013, as both aggregate demand and monetary policy shocks also played an important role. The lower bound to policy rates turned the European Central Bank (ECB) conventional monetary policy de facto contractionary. A country analysis confirms that the negative effects of oil supply and monetary policy shocks on inflation was widespread, albeit with different intensity across countries. The ECB unconventional measures since 2014 contributed to raising inflation and economic activity in all the countries. All in all, our analysis confirms the appropriateness of the ECB asset purchase programme.
Subjects: 
Bayesian methods
inflation
monetary policy
oil supply
VAR models
JEL: 
C32
E31
E32
E52
Document Type: 
Working Paper

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